How to invest your $1,400 stimulus check if you don’t need it right now
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- If you don’t need your stimulus check money now, you could consider investing some or all of it.
- You can choose to go through an online brokerage, automated investing app, or a financial advisor.
- Investment options include stocks, ETFs, options, bonds, mutual funds, and other securities.
- A trusted advisor can help you build your wealth and invest more confidently. Get a custom plan from a low-cost financial advisor. Start Now »
If you don’t need your $1,400 stimulus check money at the moment, and you’ve established a solid emergency savings fund, investing the money is one option worth considering.
You have an extensive list of options when it comes to building wealth through investments. The best choice for you depends on what type of investor you are. The brokerage route will probably be the best move for you if you’re more of a DIY investor. Brokerages and stock trading apps let you handle everything on your own, including investment research and securities transactions.
If you prefer a bit more guidance or one-on-one human advisor access, you should consider automated investment apps and/or financial advisors. Either option could be great for beginner investors or passive investors.
And don’t forget: You can always do both. Some investment apps offer both DIY brokerage services and automated accounts, so you don’t have to limit yourself to one thing. Keep reading to see your options for investing your $1,400 stimulus check.
Ways to invest
Set up a brokerage account
Online brokerages are great for active traders and DIY investors. These investment platforms typically offer multiple investment options and account types, including self-directed brokerage accounts as well as IRAs, education savings plans, and custodial accounts.
The best brokerages typically have low or $0 account minimums, copious investment choices, commission-free trading, and investment research resources. In fact, many don’t charge you anything to set up an account or trade stocks, ETFs, or options.
For instance, Merrill Edge, SoFi, and Charles Schwab all have $0 account minimums and offer commission-free trading. If you’re looking to minimize account fees while investing your third stimulus check, you’ll want to pick an investment app that doesn’t have account minimums or trading commissions.
Passively invest with an automated advisor
Automated advisors are another investment option worth considering. These investment apps essentially use computer algorithms to manage your investments for you.
They typically take things like your risk tolerance, investment goals, and time horizon into account when determining how to invest your money. So if you’re a hands-off investor or think you could use a bit more guidance, these accounts could be right for you.
Automated apps Betterment and Ellevest both have $0 minimum requirements, but their fee schedules are slightly different. For instance, Betterment charges a 0.25% annual fee, while Ellevest charges a monthly subscription fee of $1, $5, or $9 per month, depending on your membership plan.
However, in some cases online brokerages like Vanguard and Fidelity combine brokerage and automated accounts under one roof.
Use a financial advisor
You can also take the traditional financial advisor route, but this might cost you more than a brokerage or automated account. Financial advisors usually charge asset-based fees, hourly fees, or fixed fees. And in many cases, though not always, investment firms and advisors impose higher minimum account size requirements.
For instance, when it comes to investment management fees, financial advisors may charge an asset-based fee between 1% to 2% of your investment portfolio. If the advisor prefers an hourly fee schedule, you could pay anywhere from $100 to $300 per hour.
Fixed fees usually range between $1,000 and $3,000. But financial advisor fees and minimum account size requirements vary, so it’s important to ask a prospective advisor about their fees before you get started.
Your investment choices
Stocks: Most online brokerages and investment apps offer stocks. Stocks are shares of ownership that publicly traded companies make available to retail investors. Stocks trade on public exchanges, and the prices of your shares can either rise or fall due to demand and/or company earnings.
Bonds: Bonds are debt investments that governments and corporations issue out to raise money and fund projects. When you buy a bond – whether treasury, corporate, or municipal – you essentially lend money to whatever institution issued the investment. Once the bond matures, or its term ends, you get back the face value of your investment plus interest.
Exchange-traded funds (ETFs): ETFs trade on stock exchanges just like bonds and stocks. One of the biggest differences, though, is cost and composition. They generally function as a blended fund of stocks, bonds, and commodities. And like stocks, they can gain or lose value. But unlike stocks, they’re typically less volatile, and they include expense ratios (annual charges for holding shares).
Mutual funds: Mutual funds are similar to ETFs in that both offer a mix of different investment types. They pool retail investors’ money together to invest in stocks, bonds, and other asset classes. Like ETFs, most mutual funds have expense ratios. The difference is that mutual funds have professional managers that handle the fund’s investment transactions and monitor performance.
Options: Options are contracts that give you the authority to buy or sell an investment at a certain price within a specific date. You typically won’t be able to buy options through an automated investment app, but most online brokerages offer them. In fact, most apps either charge $0.50 or $0.65 per contract.
Alternative investments
Real estate: Real estate is another option. If you’re not interested in actually purchasing property and finding tenants – or you have a smaller amount of money to invest – you can invest in real estate investment trusts (REITs) on your own or utilize the help of a real estate crowdfunding platform like Fundrise or DiversyFund. Both platforms have a $500 minimum requirement.
Precious metal: Some investment platforms offer gold, silver, palladium, and other metal investments. You can generally invest in these asset classes by purchasing ounces or whole numbers of metal coins (another option is to buy mutual funds and ETFs of companies that produce similar metals). Two companies that currently offer precious metals investing are Fidelity and Interactive Brokers.
Cryptocurrency: Cryptocurrenciess are virtual assets that rely on a highly encrypted blockchain technology. They’re created through a digital process called mining, and individuals and businesses typically use cryptocurrencies to buy goods and invest. Some of the most popular crypto names are Bitcoin, Ethereum, Ripple, and Litecoin.
Should you invest your stimulus money?
You should only invest your stimulus check if you don’t need the money right now. Investing can be risky, as stock market prices often fluctuate. So if you’ve established an emergency savings fund, and a stock market fluctuation won’t detrimentally impact your finances, investing could be a smart way to grow your money.
Where you choose to invest also greatly influences how much you’ll spend. As mentioned above, fees typically vary between online brokerages, automated investment apps, and financial advisors. Make sure to compare costs between each option before making a final decision.
If you’re looking for low fees or low minimum requirements, you’ll have many options in the brokerage and automated advisor world. If you’re set on strictly working with a financial advisor, you may want to look for advisors who have no minimum account size requirements.
Rickie Houston is a wealth-building reporter at Personal Finance Insider who covers investing, brokerage, and wealth-building products.
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